EU Constitution and its replacement: an economist’s perspective, Part 1

Richard Baldwin09 June 2007

Public debate on the new treaty focuses on marketing issues (re-packing) or extreme generalities (mini-treaty), but there are important choices to be made, and the various reform elements – such as voting rules, the number of Commissioners and removal of the famous Maastricht pillars – interact in complex ways. First in a series of 4 columns on the issue.

The June 2007 Summit organised by the Germany Presidency of the EU will strive to revive the Constitutional Treaty, or parts of it. The goal is to set the agenda for a new Intergovernmental Conference that would draft a new treaty. Such agendas usually pre-determine much of the final outcome, so it is important to discuss now what any new treaty should look like.

The public debate on the new treaty is sadly lacking, focusing on marketing issues (re-packing) or extreme generalities (mini-treaty). This is unfortunate. There are some really important choices to be made, and the various reform elements – such as voting rules, the number of Commissioners and removal of the famous Maastricht pillars – interact in complex ways. Choosing bits à la carte without thorough reflection may result in unexpected consequences for the distribution of power among EU members as well as the balance of power between the Council, Commission and Parliament.

This is the first in a series of columns on the Constitution and its replacement. The series’ aim is twofold. The first is to provide an economist’s perspective on the key contents of the Constitution that was rejected by the French and Dutch. The focus is not describing the economic-policy content of the Treaty but rather on viewing the Treaty as an incomplete contract that establishes an institution in which self-motivated ‘players’ with very different objectives interact for many years. The second aim is to suggest what should and what should not be in a revised treaty.

This first instalment quickly runs over what is actually in the Constitution.

A constitution unlike any other

The Constitutional Treaty is awkward – 350 pages of legalese and intricate cross references to articles that cross reference other articles. It fails miserably in its assigned task of bringing the EU closer to the people. Probably most law professors, even those specialising in European law, do not understand the Constitution as a whole, nor its full implications for Europe’s legal system.

Strange as it seems, this was unavoidable. The EU cannot have a constitution in the traditional sense – i.e. a precise statement of goals, allocation of powers, and basic institutions. If a body wants a real constitution, it must write the constitution before passing hundreds of thousands of pages of legislation – not after. Legal logic demands it.

Normally, a constitution is the highest level of law; if a law passed by the national parliament or a regional parliament conflicts with the constitution, the constitution trumps. In the EU, the Treaties are the highest level of law (directives and the like are secondary law). A real EU constitution would put a higher level of law on top of the Treaties. What’s wrong with this? “Legal uncertainty.” One would never know if/when a judicial interpretation of the inevitable ambiguities might alter existing law. This is a point that the European Conventioneers realised immediately and it is why the Constitutional Treaty both adopts most of the text of the existing Treaties and repeals the old Treaties. This is why it had to be long, complex and legalistic.

Basic structure of the Constitution

It begins with a Preamble but the meat is in four “Parts” that are divided “Articles”, numbered consecutively, 1 to 448. Articles' numbers are preceded by the Part number, so Article II-104 – citizens’ right to petition the European Parliament – is in Part II.

Part I reads like a real constitution, almost. It lays out the goals of the Union and the fundamental rights of EU citizens, lists areas in which Members States transfer sovereignty to the EU, sets out the EU institutions, their powers and interrelationships, and details the legislative process. If you want to be an informed voter read Part I. It’s 30 pages long with little of the annoying “notwithstanding paragraph X of Article Y” type of legalese.

Importantly, Part I removes the 3-pillars set up by the Maastricht Treaty. In today’s EU, issues covered by the first pillar (basically Single Market matters) are subject to supranational decision-making. Part of the supranationality comes from majority voting in the law-making process that applies to most first-pillar policies; this means that a Member can vote against a law and still have to implement it if the law passes. Another part comes from the powers granted to the European Commission, which controls, for example, competition policy. Yet another part comes from the EU Court which has the power to overrule national laws and rulings of national courts that conflict with European law.

Second pillar issues (defence and foreign policy) and third pillar issues (justice and home affairs) are not subject to supranationality. Countries are not obliged to do things they do not agree with. The Maastricht Treaty explicitly put the pillars in place to limit the expansion of areas where the EU machinery trumps Member States' prerogatives. Removing the pillars is therefore potentially much more than a tidying-up of the EU’s organigram.

Part II is huge – short, but huge. It does, however, take some thinking to see this. Part II reproduces the European Union Charter of Fundamental Rights. Although the basic text was agreed in 2000, putting it into the Constitution completely changes its potential impact. Before the Charter was a ‘solemn proclamation’ by The European Parliament, the Council and the Commission. Since it was not primary law (a treaty) or secondary law (directives, decisions, etc.), it did not have the formal status of law as far at the EU institutions, especially the EU Court, are concerned. Moreover, since much of the Charter concerns second pillar issues, the supranational decision-making processes of the EU could not be engaged. Putting it in the Constitution makes it binding on all members. With the pillars removed by Part I, this also engages the supranational powers of the Commission in its role as “guardian of the Treaties”, and those of the EU Court.

A key principle of European Law is “primacy”, which means that European law has the final say – a principle that has been used to overturn Member State laws repeatedly over the past 50 years. Because of this, it matters greatly whether the Charter is a solemn proclamation or part of the EU’s highest level of law. In principle, Part II puts the Charter above Member States’ national laws. It makes the EU Court the ultimate arbitrator of ambiguities between the Charter’s 14 pages and the hundreds of thousands of pages of European law and the millions of pages of the national laws of EU Member States.

To satisfy anti-federalists such as Britain, Part II explicitly states that the Charter does not transfer new powers to the European Union, but this is a messy political compromise that does not transcribe well into legal logic. The Constitution states that the EU Court “shall ensure that in the interpretation and application of the Constitution the law is observed.” Since the EU Court works on the basis of legal logic, the outcome is unclear. More than once the Court’s application of legal logic has lead to unforeseen consequences.

In particular, potential conflicts between the Charter and Members’ social policy abound. The Charter views some workplace issues as Fundamental Rights, e.g. "protection in the event of unjustified dismissal" (II-90), and "fair and just working conditions" (II-91). Part II says that the Charter should not be used to create new laws, but who can say what the Court would rule if a British worker complained that some UK law violates her right to working conditions that respect her health, safety and dignity (II-91)? The very power of the words, in capital letters, "Constitution, Fundamental Rights, and Charter" suggests an acknowledgement of their primacy.

Part III is long and hard to read. It incorporates most of the Treaties of Rome and Maastricht as modified by subsequent treaties.

Part IV is full of legal niceties and some last minute political compromises – for example, one important one says the Nice Treaty voting rules remain in force until October 2009.

That, in less than 1500 words, is what is in the Constitution – as it stands rejected. The next instalment attempts to piece together the overall change – looking at the sum of the parts rather than the changes individually.

By one estimate, “Guide to the New Constitutional Treaty” (The Federal Trust) only about a fifth of the Constitution contains new or substantially amended articles.